Hedge-Fund Marketing Could Begin New Era as SEC Set for Proposal

Hedge funds may go from soliciting individual investors behind closed doors to conducting wide advertising campaigns under a rule set for proposal today by the U.S. Securities and Exchange Commission.

As reported by Jesse Hamilton and Margaret Collins of Bloomberg News, SEC commissioners will decide whether to invite public comment on a proposal for how to end decades of restrictions on how private funds and startups can pursue investors. The proposal is driven by a law that repealed a ban on pitching such investments to all but a select few investors, such as those accustomed to pumping cash into hedge funds.

The Jumpstart Our Business Startups Act, signed into law by President Barack Obama in April ended the ban as part of a wider effort to ease funding options for fledgling companies. The shift drew criticism from investor-protection groups and the mutual-fund industry, including the Washington-based Investment Company Institute, which have said that lifting the ban without restrictions may expose investors to misleading advertisements by some private funds.